Item 1.01. Entry into a Material Definitive Agreement
On July 7, 2022, Xerox Corporation (“Xerox Corp.”), as borrower, and its parent company, Xerox Holdings Corporation (the “Company”), entered into a Credit Agreement (the “New Credit Agreement”) with Citibank, N.A., as administrative agent and collateral agent (the “Agent”), and the lenders party thereto.
The New Credit Agreement provides Xerox Corp. with a $500.0 million revolving credit facility (the “New Revolving Credit Facility”). The material terms of the New Credit Agreement include the following:
Under the New Revolving Credit Facility, Xerox Corp. may borrow up to $500.0 million, as well as an uncommitted accordion feature that allows the Company to increase the New Revolving Credit Facility by a total of up to $150.0 million, subject to obtaining additional commitments from existing lenders or new lending institutions. The New Revolving Credit Facility includes a $150.0 million letter of credit subfacility.
At Xerox Corp.’s election, the borrowings under the New Revolving Credit Facility in U.S. dollars will bear interest at either (1) a rate per annum equal to the highest of Citibank’s prime rate or a rate 0.5% in excess of the Federal Funds Rate or a rate 1.0% in excess of
one-month
Term SOFR (the “Base Rate”), in each case plus an applicable margin, or (2) the
one-,
three-, or
six-month
per annum Term SOFR (the “Term SOFR Rate”), as selected by the Company, plus an applicable margin. The applicable margin for Base Rate loans, through the quarterly reporting for the fiscal quarter ending September 30, 2022, is 1.00% per annum, and thereafter varies from 0.50% to 1.25% depending on the Company’s consolidated total net leverage ratio (as defined in the New Credit Agreement). The applicable margin for Term SOFR Rate loans, through the quarterly reporting for the fiscal quarter ending September 30, 2022, is 2.00% per annum, and thereafter varies from 1.50% to 2.25% depending on the Company’s consolidated total net leverage ratio. Xerox Corp. may also borrow in currencies other than U.S. dollars under the New Credit Agreement, and such borrowings will bear interest calculated under a construct similar to that described above. Principal is payable in full at maturity on July 7, 2024, and there are no scheduled principal payments prior to maturity.
Xerox Corp.’s borrowings under the New Revolving Credit Facility are supported by guarantees from the Company and its subsidiary guarantors, and by security interests in substantially all of the assets of Xerox Corp., the Company, and its subsidiary guarantors, subject to certain exceptions.
If an event of default occurs under the New Revolving Credit Facility, the entire principal amount outstanding under the New Revolving Credit Facility, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable, subject, in certain instances, to the expiration of applicable cure periods.
The New Revolving Credit Facility requires the Company to comply with the following financial covenants measured as of the end of each fiscal quarter, commencing with the quarter ending September 30, 2022: a total net leverage ratio, an interest coverage ratio, and a minimum unrestricted cash requirement.
The New Revolving Credit Facility also imposes restrictions on the Company and its subsidiaries, including on the amount of dividends the Company is permitted to pay and the amount of shares the Company is permitted to repurchase. Under the New Revolving Credit Facility, provided there is no event of default existing, the Company may declare and pay cash dividends on shares of its common stock and its preferred stock, and may repurchase shares of its common stock and its preferred stock (1) in an unlimited amount if, at the time such dividend or repurchase is made, the Company’s consolidated total net leverage ratio is 3.5 to 1.00 or less or (2) in an aggregate amount in any fiscal year not to exceed the greater of (x) $200.0 million or (y) 50% of free cash flow for the prior fiscal year, commencing with the fiscal year ending December 31, 2022.
The foregoing summary of the New Revolving Credit Facility contained in this Current Report on Form
8-K
does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the New Credit Agreement, a copy of which is attached hereto as Exhibit 4.2 and incorporated herein by reference.
Item 1.02. Termination of a Material Definitive Agreement
On July 7, 2022, in connection with the execution of the New Credit Agreement and the implementation of the New Revolving Credit Facility as set forth in Item 1.01 above, the Amended and Restated Credit Agreement, dated as of August 9, 2017 (as amended by Amendment No. 1 thereto, dated as of February 15, 2018, Amendment No. 2 thereto, dated as of July 31, 2019, Amendment No. 3 thereto, dated as of July 31, 2020, and Amendment No. 4 thereto, dated as of March 24, 2022), by and among Xerox Corp., the Company, Citibank, N.A., as administrative agent, and the lenders party thereto was terminated, all outstanding obligations of Xerox Corp. and the Company thereunder were repaid, and all commitments thereunder and all guarantees granted in connection therewith were terminated.